PARIS, AUG. 13 -- President Saddam Hussein's appeal for a holy war against "imperialist targets" has aroused concern that Iraq may be preparing "a second front" of terrorist cells to destabilize Arab states opposing him and to attack Israeli, American or European targets, according to European governmental and security officials.

As multinational forces augment their defense of Saudi Arabia and enforce United Nations sanctions against Iraq, Western military strategists suggest that Saddam will seek to avoid any direct confrontation with powerful foreign fleets assembling in the Persian Gulf that could trigger a massive assault on Iraqi military installations or Baghdad itself.

Rather, some European officials said that if the military situation turns into a protracted stalemate and international sanctions begin to bite, Saddam may be tempted to use terrorist proxies to achieve his objectives.

They said the primary target of such terrorists could be Israel and moderate Arab states, where agents might seek to foment unrest or carry out assassinations to topple leaderships backing the immediate withdrawal of Iraqi troops from Kuwait and restoration of the Sabah dynasty.

During the Arab summit meeting in Cairo last Friday, Saddam broadcast a speech urging Arabs to rise up against Western forces and to overthrow Saudi Arabia's ruling family in order to "rescue" the shrines of Islam there.

Iraq has also set up a radio station called "Voice of Arab Egypt" that exhorts the Egyptian population to take to the streets and bring down the government of President Hosni Mubarak, who ordered Egyptian forces to Saudi Arabia Friday to protect the desert kingdom against an Iraqi assault.

European and American targets could also come under attack, as the Iraqi leader has warned, if armed conflict involving Western forces erupts in the gulf. European security agencies have stepped up surveillance and information exchanges on known sympathizers of Saddam's regime, intelligence officials said. Any military incident in the gulf that could be cited by Iraq as a pretext for revenge would almost certainly put security forces in possible target areas on even higher alert, those sources added.

Kuwaiti diplomatic sources loyal to the deposed ruling family say they have warned British security officials that Iraq might send terrorists to Europe using Kuwaiti passports confiscated during the occupation. The Kuwaiti Embassy in London is attempting to register every Kuwaiti passport holder in Britain and make photocopies of all passports to help British authorities weed out possible Iraqi agents.

In the past, Britain and France have been largely immune from Iraqi-sponsored terrorism because both countries leaned toward Baghdad for commercial and political reasons during the eight-year war with Iran. France's lucrative sales of sophisticated weaponry to Iraq and the incarceration here of Iranian-backed terrorists were cited as principal motivations behind a spate of terrorist bombings against French civilians in recent years.

But some opponents of Saddam say he has the will and manpower to launch a wave of terrorist attacks through a network of agents and sympathetic allies. Sahib Hakim, an Iraqi dissident living in London who heads the Committee on Human Rights in Iraq, said Saddam employs many agents living and working in Britain, largely to help funnel arms and weapons technology and to harass dissidents.

The purported head of Iraqi intelligence was arrested and deported earlier this year from Britain for leading an operation to smuggle 40 krytrons, used to trigger nuclear explosions. The operation was foiled at Heathrow airport by British customs agents.

Some Middle East specialists and European security officials see a potential growth in the pool of recruits for terror activities through Saddam's self-promotion as the belligerent defender of the causes of downtrodden Arabs.

While the Iraqi invasion has been condemned by a majority of Arab countries, Saddam's display of power has won clear backing from two important segments of the Arab population: Palestinian nationalist leaders, who see in him a militarily strong figure who can stand up to Israel, and poor and disenfranchised masses who resent the extravagant wealth of the gulf sheikdoms.

"Saddam is seen by many poor Arabs and frustrated Palestinians as the kind of leader through whom they could find their revenge. He is somebody who can make desperate people become dangerous," observed a French diplomat with long years of experience in the Arab world.

French officials noted that Saddam, by linking the Kuwaiti crisis with Israeli occupation in Gaza and the West Bank, was wooing support from Palestinians in those territories whose 2 1/2-year uprising has failed to show progress toward independence.

Palestine Liberation Organization Chairman Yasser Arafat emerged as one of Saddam's strongest proponents after the invasion of Kuwait, which was hailed by many Palestinians in the Israeli-occupied territories and in Jordan.

In addition, Saddam apparently has acquired control over several Palestinian radical groups associated with recent terrorist activities. The commando teams run by Abul Abbas and Abu Nidal now are believed to have the bases of their operations in Baghdad.

While Abu Nidal's forces are said to be badly split after a purge earlier this year, Abul Abbas declared last week, "We will strike at American and imperialist interests as soon as any foreign soldier sets foot on Arab territory."

The Islamic Jihad's Amman faction, which claimed responsibility for the attack on an Israeli passenger bus in Ismailia, Egypt, earlier this year, has declared loyalty to Saddam. This lesser-known group, headed by a former Gazan named Rajab Tamimi, was previously thought to be allied with Hezbollah, the Iranian-backed Lebanese Shiite movement.

"It means that Saddam Hussein has succeeded where {Syrian President Hafez} Assad failed. He now has all the major Palestinian terrorist groups and the PLO political groups under his wing," said Pinhas Inbarri, an Israeli writer on Arab affairs.

Israeli officials say they are particularly concerned about future terrorist attacks coming from Jordan, where they say Iraq has built an infrastructure of well-funded agents.

Washington Post correspondent Glenn Frankel in London contributed to this story.